Aug 21, 2018

Product Resale and Financing Increases an MSP's Growth and Profitability

If benchmarking and metrics are as fascinating to you as they are to me, maybe you’ve heard of Service Leadership, a company who provides total profit solutions and benchmarking for IT companies. You may have even sent them your IT financials to find out where you stand in comparison to other MSPs. That’s why I love when GreatAmerica spends a lot of time with Paul Dippell, CEO of Service Leadership, planning educational webcasts for MSPs.

This year, Paul is sharing how higher profitability MSPs in the Service Leadership Index® (SLI®) are growing faster and outperforming their colleagues in the industry.

Product Resale is Critical to Managed Service Provider Growth

I’m going to give you a sneak peek into one of those best practices: add product resale.

If you are an MSP already selling products; sell more.

According to Service Leadership, improving product resale can increase overall revenue by 33%, increase EBIDTA (Earnings Before Interest, Taxes, Depreciation and Amortization) by 31%, and provides 12.5% in higher valuation.

Prediction: Best in Class Managed Service Providers Will Sell More Product

The Role of Financing in MSP Product Resale

If Service Leadership is known for anything, it is collecting data, creating benchmarks, and making observations about the data in the managed services industry. In light of their views on product resale, Service Leadership did an analysis on the financials of the MSPs who do business with GreatAmerica to finance their product resale.

Image Above: Service Leadership shares the impact on Product and Infra Services GM%, and adjusted EBITDA % as the MSP increases the proportion of their product revenue driven through GreatAmerica Financial Services (GFSC).

Many are seeing incremental adjusted EBITDA growth when they are financing more than 10% of their product. In addition to the photo caption, Paul made the following observations:

Product gross margin (GM) percentage goes up because clients are less price sensitive in payment form.

Infrastructure services GM% goes up because the client adopts standards more quickly, improving the MSP’s efficiency.

Infrastructure services GM% goes up because managed service fees combine with product payments are more difficult for the client to cross-shop.

During the webcast Paul Dippell concludes:

“Either top performing MSPs are doing more product sales with GreatAmerica, or doing more product business with GreatAmerica enables MSPs to have higher performance.”

Other MSP Best Practices to Drive Growth and Profitability

Product resale is just one of several best practices MSPs are applying to drive growth. GreatAmerica commissioned a custom OML tool with Service Leadership to take the best practices of successful financing partners and create benchmarks to create opportunities for growth and profitability. If you want to know your financing and HaaS OML, you can request an evaluation here: www.greatamerica.com/custom-oml.

About The Author

Lee Rozeboom

Lee Rozeboom, Vice President of Strategic Relationships at GreatAmerica Financial Services, is responsible for establishing and maintaining relationships with those with influence in the Unified Communications, Low Voltage and IT markets. Lee will also serve as an outward facing voice for our organization and provide oversight and guidance to the Data team. In his previous role, Lee served as the Vice President of Sales for the MSP division. He has been involved in lease financing since 2006. Prior to joining GreatAmerica in 2006, Lee was a Financial Planner, holding his Series 6 and 65, for Northwestern Mutual Financial Network. Lee received his Bachelor of Science in Finance and Marketing from Babson College in Wellesley, MA.

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